- Drill, baby, drill: What Trump’s second term means for energy prices. On the campaign trail, Donald Trump vowed to reduce fuel prices, but this is unlikely to be achieved via higher domestic production. The US is already the world’s top oil producer, hitting a record-breaking 13mn barrels per day (mbd) in 2023. The administration could also deliver higher LNG supply to global markets by reducing regulatory hurdles and promoting infrastructure development, which could reduce European gas prices (and thus power prices) by over -15%. On the negative side, President Trump could reinstate sanctions against Iran potentially driving up prices by +5-10%,. President Trump’s stance on climate policy could also set the US back a few years in the energy transition and hurt global efforts to combat climate change.
- Q3 earnings: The Atlantic divide continues. Both S&P 500 and Stoxx 600 companies delivered earnings growth in Q3 2024 (+8.8% y/y) but the revenue recession continued in Europe, with a -1.7% contraction. Overall investor sentiment has improved following the reelection of Donald Trump and the Federal Reserve's second rate cut in November. Small and mid-cap companies, particularly in the US, are well-positioned to benefit from Trump’s reshoring policies, with earnings growth projected at +30-50% over the next two years. But US-centric reshoring policies under Trump and global uncertainty may challenge the recovery prospects for European companies. Looking ahead, earnings and revenue growth will be critical to sustaining market momentum, which has mostly been fueled by valuation-driven gains in 2024. For 2025, we expect both earnings and returns for US and Eurozone equity markets to rise by +7-12%.
- Carbon productivity: Taking stock after 29 climate change conferences. As COP29 in Baku comes to a close, we take stock of what has been achieved after decades of climate conferences. The good news is that the global economy has seen a green productivity gain of 70% cumulatively since 1990, producing USD 3.13 at constant purchasing power parity prices for each kg of greenhouse gas emissions in 2023. And the EU is the clear leader among large economies, with a strong acceleration of carbon productivity from 2.6% to 4.1% annually after the Paris agreement, albeit at seemingly high economic costs. The bad news is that the pace of change is by far not enough to meet net-zero targets by 2050 as carbon productivity mathematically has to go to infinity, which implies much higher growth rates than what we see currently. Transformative breakthroughs across multiple sectors and countries are urgently needed. Without faster progress, the world risks falling short of climate goals, with significant economic and environmental consequences.
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